General Electric as an Environmentally Sustainable Business - Case Study Example

General Electric as an Environmentally Sustainable Business 13 April, 2007 General Electric: As an Environmentally Sustainable Business Over the last 20 years, large corporations such as General Electric (GE) have been evolving rapidly, with its local marketing expanding into the global arena. General Electric Company, based in the United States, is one of the largest, most diversified companies in the world and is not to be confused with General Electric plc, a major UK company now owned by Ericcson. It further has been credited with implementing up-to-date technologies in environmental management. 1) How well does the company use environmental management systems and performance measures to implement its strategy Market share is no longer the only focus of a large corporation. In the area of supply chain management, some companies are surpassing slower rivals and are establishing positions of dominance by collaborating with carefully chosen trading partners. One such company is Sanyo Epson. ISO 14031 is used globally to evaluate organisations in the "manufacturing, health services, transportation, electric utility and municipal sectors in order to evaluate environmental performance (EPE), provide a basis for performance benchmarking, demonstrate compliance to regulations and increase operational efficiency" (ISO 14031, par. 1) It assists organisations to obtain ISO 14001 certification. Other companies, for instance, General Electric, have focused their efforts mostly inward, with the integration of high-tech programs to track their progress. In today's business environment, performance measurement relates to all aspects of business from leadership to management to employees to customers. It is a method by which company output, brand recognition, cooperation and interaction with other companies are measured. Because GE has expanded its product line to include almost every area of manufacturing, a successful environmental management program must be able to cover every phase of their business, from supply chain to operations to marketing. GE has the broadest array of infrastructure products, services and financing in the world, "from Energy to Aviation to Transportation to Water to Oil & Gas" (General Electric 2006, p. 6). The emphasis in the present global marketplace is on "corporate social responsibility (CSR)," which, according to World Business Council for Sustainable Development (WBCSD), is based on a set of principles which companies relate to their social, economic, and ecological environment (Stigson, 2003). Simon Zadek introduced the phrase "corporate responsibility" in his book The Civil Corporation (2001) and has continued to define the term in subsequent publications (Zadek 2004). The three areas of supply chain management are product, information and finances flow (Supply, 2006). GE utilises innovative technology to keep track of all phases of their business. Their most recent process is called "Ecomagination", introduced by CEO Jeffrey Immelt, and its purpose is to provide future environmental products designed to create sustainable resources for the future. GE is active in global warming concerns, water supply and conservation. In their most recent Annual Report (General Electric 2006), the company makes it very clear that environmental solutions are a running issue, with environmental management systems based on their Global Reporting Initiative, but resolution appears to be far from complete in some areas. GE considers its environmental management system successful, but research into the system indicates that might not be the case. The company seems to be more concerned with finding innovations than resolving environmental issues already in existence. The supply chain must take into consideration a group of past environmental issues (Hudson River, New York State; Rome, GA; and Housatonic River as well as five other areas recently included) (General Electric 2006, p. 60). In the operations area, GE has expanded its markets into China, India, Eastern Europe, Russia, Middle East, Africa, Latin America and Southeast Asia (General Electric, p. 6). Its Environment, Health & Safety system places a heavy focus on improving chemical management programs and developing the company's Environmental Framework which is based on its commitment to build innovative solutions to future problems. In the meantime, the company is involved in the cleanup of chemicals dumped in different areas of the United States, a situation that occurred prior to present awareness of such substances affecting health and welfare of residents in the areas. The corporate environment today is one of evolving strategy as increased environmental awareness calls for what is called "industrial ecology", a process by which the five Rs are utilised to give major companies resolutions to current unresolved issues. Applying the five Rs [reclaim, reuse, recycle, reduce, and replace] to General Electric's management performance offers the following environmental methodology: In the area of global warming, GE has been named one of the top companies involved in a sustained commitment to reduce and control greenhouse gas emissions by disclosing data and strategies, supporting regulatory actions, whilst taking steps to find solutions to climate change (Chipman, 2006). According to GreenBiz.com (2006), GE is catching up and joining Dupont and Alcoa in leading their industries, while far too many American corporations are ignoring the climate issue which may be putting their companies and shareholders at risk. Clean water and water supply are two more major areas of concern worldwide. In the area of water recovery, GE Water & Process Technologies has developed a combination of membrane, chemical and physical purification methods to reclaim and reuse up to 90 percent of the volume of wastewaters that would otherwise be lost through discharge. These technologies include: Advanced membrane systems Chemical treatments Fixed-media devices Evaporators and crystallisers Enhanced air flotation General Electric also has taken its water process technologies abroad with its Sulabiya Project in Kuwait, the world's largest membrane-based wastewater reclaim area. Other programs are desalination systems to recycle seawater and brackish water in Trinidad as well as the future Hamma Project in Algeria . Mobile water units were used by GE to replace water supplies for victims of the 2004 Asian tsunami. In the meantime, GE's total water use and total amount of waste within the company by type and by destination is not included in its Environmental Performance Report. According to the report, "it will be reported in 2007" (General Electric, p. 17). In these two main areas, reducing greenhouse gas emissions and water conservation projects, GE is applying the five Rs adequately at present in supply chain projects outside the company, but how well they are applying these principles within the company cannot be determined until the next annual report is published. Applying the principles to the creation of the report itself General Electric 2006, p. 119), the following efforts at conservation are: 1) majority of power used was renewable energy (Reduce, Reuse), 2) paper for report contains 10% to 100% post-consumer material (Recycle), paper supplied by participants of the Sustainable Initiative programs (Reclaim), and 3) GE employed a printer which produces its own electricity with virtually no volatile organic compound (Replace). If these principles are applied in operation of the company itself throughout the world, its efforts can be seen as successful. Health Risk of PCBs One of the major public concerns for GE since 2002 has been the need to remove chemicals from three areas containing PCPs (polychlorinated biphenyls). GE's operations involve the use, disposal and cleanup of substances regulated under environmental protection laws. In February 2002, the Environmental Protection Agency ruled that PCBs had to be dredged from a 64 kilometre stretch of the upper Hudson River in New York State, another area in Rome, GA, and a third from the Housatonic River, adding a sixth R to the five Rs-remove. From approximately 1947 to 1977, the company discharged PCBs into these areas and five more areas have been added to the original three since 2002. The primary health risk is accumulation of PCBs in the human body through eating contaminated fish. PCBs are linked to low birth weight, thyroid disease, and learning, memory, and immune system disorders. In GE's Citizenship Report, their Global Reporting Initiative (GRI) discusses environmental issues and remedial responsibilities for the three major problem areas discussed above (GE Remedial, 2006; Hudson River, 2006; EPA Issues, 2003), but the project continues to be time-consuming and not easily resolved. GE used to be best known for appliances, but after major restructuring in the 1980s, it extended its expertise into plastics, TV broadcasting, jet engines, and power plants and continues to increase its holdings. With such a broad spectrum-from light bulbs to high-tech-it is not surprising that environmental concerns would be a major issue for the company. Environmental Management Systems In order to evaluate General Electric, it must be determined what guidelines they are using in their operations to meet expectations in an environmentally aware business world. Corporations are expected to meet quality standards with the Eco-Management and Audit Scheme (EMAS), an EU initiative to help industrial companies improve their environmental management and performance. The scheme offers formalized procedures for assessing environmental impact of a company's policies and practices. EMAS is closely allied to ISO 14000 standard series that replaced BS 7750 in 1996 (Hungary, 1997). An Environmental Management System (EMS) that meets standards is designed to enable any business to maximize benefits and minimize adversity. General Electric in its identity as a world corporation recently addressed the development of an EMS through a program set up in Hungary. The larger companies in Hungary, such as Tungsram-GE Lighting (part of General Electric), are able to develop their own environmental management systems independent of international guidance. The environmental manager of Tungsram-GE presented a statement by GE's Chairman as follows: "Every single person in GE has to be an environmentalist. Our products have to be thought of in those terms. Our processes, too" (Hungary, 1997, par.18). GE has little or nothing to say about the possibility of merging with or partnering with other companies. It seems to be their contention that they don't need outside assistance. At the beginning of 2001, all 11 European manufacturing facilities of GE Consumer Products Lighting successfully achieved ISO 14001 certification following a "very intense and effective program implementation period of only 9 months" (ISO 14001, par. 2). GE defined the absolute requirements of each standard element of ISO 14001 to insure consistency for all manufacturing facilities involved, and developed a successful environmental management system across the board. Even so, this took place within GE alone, and working with other international companies on a standard to be reached in ecological problems does not seem to be a priority. General Electric's Plastics Division is one of its most successful business areas, and research and development is its focus. But has the company found a way to utilize the five Rs with plastics that can become environmentally safe GE has spent several years of research trying to find a biodegradable plastic. The result is Lexan, but not only have the world's plastic waste disposal problems not been completely resolved, Lexan is unfortunately used in the production of landmines (Human Rights, 1997). Sustainability in Future of GE Worldwide GE operates in more than 100 countries throughout the world, and its success can be attributed to its leadership and its strategy which includes social, economic and environmental concerns. According to GE's global CEO Jeffrey Immelt (Immelt 2005), "Ecomagination" is a global strategy applying advanced technologies as the way of the future. The company plans to double their investment in research and development, introduce innovative products and services that provide environmental performance advantages such as wind and solar to customers, purification of water, and reduction of greenhouse gas emissions. Some Ecomagination technologies are already in use. For instance: The GEnx engine for Airbus 350 and Boeing 787 which is more energy efficient, more quiet and with lower emissions. The offshore wind turbine farm at Arklow, Ireland, capable of harnessing enough power to supply 16,000 Irish homes per year. The H system turbine which can improve efficiency by 10 percent at Wales's Baglan Bay. Seawater desalination plant in Africa which will provide drinking water to 25 percent of people in Algiers, Algeria. General Electric uses wind power equipment crafted at facilities in Saltzbergen, Germany; Noblejas, Spain, and turbine materials in France, Austria and England (Eco Report, 2007). 2) How well does the company apply the principles of resource savings to its supply chain, operations and marketing GE's 2005 citizenship report, "Our Actions," highlights the company's efforts to measure performance in a context broader than financial results and stock price. The implementation of several Ecomagination products have been going forward as noted above, with the company's Web site called "ge.Ecomagination.com offering a showcase of various advanced and energy-efficient products (2007). These are only a few of the "Ecomagination" strategies initiated by CEO Jeffrey Immelt. Jim Rogers, head of Cinergy, a coal-fired American utility and GE customer, thinks GE's "visionary leadership" may soon help push the American energy business "from denial to pragmatic acceptance" of mandatory caps on carbon emissions (Greening, Sec. 3, Par. 4). 3) How well is GE managing the sustainability issue in their company strategy It would appear that the intent is good, and the sustainability issue seems to be under control, but like many large American conglomerates, GE leadership stays within the sphere of the company itself and makes little effort to learn from other cultures and businesses in other countries on meeting sustainability needs for the future of this planet. Ecomagination is all very well as a strategy for succeeding in business, but is that a measuring stick for how well the company uses environmental management systems General Electric makes a point of calling itself a global company, but until they understand how much they could improve by studying and cooperating with foreign companies, America's standing in the world of business has every possibility of decreasing in status. The Ecomagination strategy makes GE look good at present, but is it a sustainable strategy for the future General Electric is such a large organisation it is difficult to find the areas that need the most improvement. However, regardless of all the company's new sustainable products, the PCB issue remains and shows no immediate signs of being resolved. Instead of promising resolution and not delivering, the company could use its quality chemical research and development to find a way to speed up the dredging process and resolve an issue that can only interfere with GE's public image. Perhaps the most important factor to be addressed by GE is its somewhat arrogant belief that it has or will have all the answers and other companies should learn from GE. A comparison of GE with Sanyo Electric offers the following areas that might be useful for GE in a global marketplace: GE has made Ecomagination its major environmental performance area, but they could learn a great deal by studying other companies, i.e. Sanyo. Epson and Sanyo Electric merged in 2006 to form Sanyo Epson, and the company then developed its own environmental policy in order to meet ISO 14001 requirements for its two head offices and two manufacturing plants. The company is committed to making itself the leading company in the industry for environmental performance by upgrading their efforts through ISO 14031's Plan-Do-Check-Act cycle (Sanyo Epson, 2006). For GE, forecasts of endlessly fast growth expounded by CEO Immelt should be treated with caution. Immelt is convinced that his Ecomagination campaign is destined to increase GE's position in a world economy, but, according to an Economy article (Greening, 2005), promising too much on green issues can backfire, and GE's future could ultimately dim considerably. Another risk is that GE has never had a record of successful product breakthroughs like those of Dupont. Even if the firm's laboratories produce the technological breakthroughs, GE's marketing and sales team is used to incremental improvements and might be reluctant to accept such innovative products. References Bocci, F. Defining Performance Measurement, PMA Newsletter, Vol. 3, Issue 1-2, 2004 September. 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The Path to Corporate Responsibility, Harvard Business Review, 1 December, 2004, viewed summary 9 April, 2007 http://harvardbusinessonline.hbsp.harvard.edu/b01/en/common/item_detail.jhtmlid=R0412J Read More